Is Loyalty Just Discounting in Drag?

I heard an interesting comment a few weeks ago from the Marketing Director of a top NZ media company at an industry discussion on NZ consumers, he said that loyalty was just discounting in drag. This comment blew me away, maybe this blinkered view is why our traditional media channels are being overtaken by disruptors, because their management have an outside in way of looking at things and are missing the key elements of the revolution that is happening around them.

I’ll admit many loyalty programmes do look like discounting in drag, spend $200 and get a $20 voucher, collect 200 points and get a $15 voucher that’s only valid for the next 4 weeks. But Loyalty 2.0 is anything but discounting in drag, Loyalty 2.0 puts data collection and understanding the customer at the heart of your marketing and I’ll even be as bold to say if you don’t have a loyalty programme you will struggle to navigate your way through the next evolution of data driven marketing and will be left behind.

So why is having a loyalty programme a lynch pin in the next stage of marketing?

Connecting the dots in an Omni Channel world

Omni Channel has been the hot term for retail marketing for the last few years, but is it being done well in New Zealand yet and can it actually be done well if you don’t have a loyalty programme of some sort? The short answer is you can’t do Omni Channel well without a customer ID tying together in store sales as well as online browsing and purchases. With the rapid uptake of smart phones this also means you need to be able to tie in mobile browsing on your site and product related search on the web. Customer journeys are no longer linear, so if you haven’t done a good customer journey and touch point mapping in the last 2 years, this needs to be your first priority to understand how you need to design your data and loyalty strategy to enable the customer journey. How you structure your organisation and platforms will also impact your ability to become a true Omni Channel retailer, don’t lump all of digital, online sales and loyalty together in one siloed team or you’ll never get it right.

Making the digital experience customised

Everything digital and direct mail can be customised, from your landing page and product recommendations through to the display ads you run via programmatic advertising. How you put the right messages to the right people will come from a deep analytical understanding of how different segments behave and finding the right time and message to feed into your briefs. This isn’t all data scientists doing the number crunching, the marketers need to get involved as well to rationalise the insights and connect them back to a stage in the customer journey and how they want the customer behaviour to change. Imagine trying to understand your high value customers churn indicators if you can only see 1/3 of their transactions! A poor digital experience can impact on a customers loyalty and could be as simple as recommending a product they have just bought instore and are not likely to buy again.

Remember loyalty is all about making the customer experience customised, I don’t want to know if there is a baby sale on in your department store if I have only ever bought from the women’s, men’s and cosmetics departments.

Enabling the development of a real relationship

So what is a real relationship with your customer’s vs a discount in drag, in 3 words its trust, commitment, and reciprocity. Marketers leverage customer-centric data to build trusted, reciprocal, and committed relationships with their best customers, who in turn share their precious data to further deepen the relationship. The high degree of consumer control ensures transparency, and a rich exchange of value for information that provides benefit to both marketers and consumers.

I want my retailers I visit often to know me like the corner dairy or small grocer used to, not just the Saturday checkout staff recognising that I always come in on Saturday, I want my supermarket to pick up on the fact I went gluten free and paleo 6 months ago and have changed my shop to be focused on the fresh departments. I’m now an even more valuable customer in margin $ and some emails with recipes ideas for paleo dishes and gluten free alternatives may stop me from taking most of my supermarket spend to the local butcher and greengrocer.

This is what developing a real relationship means, it’s about developing a long term view of the customer and not just seeing every communication or contact opportunity as a chance to push this week’s specials as curated by someone in the merchandise team. It’s not only the collection of points or “Club” discounts that make us swipe that card every time, the new frontier is in how marketers use that connected data to make our lives easier and curate a better service that’s just for us, I don’t know of many discount tactics that can do that.

Beacons more than just right offer, right time, right place

Beacons are the next frontier of trigger devices for data based marketing and whist these can be utilised without a loyalty ID, the relevancy of offers and content pushed without referencing a purchaser’s history is substantially reduced and the channel will just become Spam. I don’t want to be prompted with a generic offer every time I walk past my local sandwich shop, but if you know I usually get my lunch after 12:30 and am most likely to order a Chicken salad, then an offer for a Chicken salad and a smoothie for $12 when I’m 2 stores away at 12:45pm is more likely to be welcomed.

Beacons are about to become mainstream which means we have a new wave of digital Spam about to hit our phones and making these messages and offers useful and relevant will be key to avoiding your customers turning off your notifications. Neiman Marcus Group in the US, a high end department store, are using beacons to direct people to in store events and shows as well as alerting personal shoppers when one of their customers comes into the store.

The new frontier for beacons won’t be around the pushing of offers, it will be around tracking store movements by segment to aid store planning and merchandising. This is already being done on an anonymous basis with cell phone id’s but add a customer level to this and possible analytical uses are endless.

Time for customer based reporting and analytics to be a must have

So according to the joint VisionEdge Marketing, ITSMA and Forrester Research 2013 Marketing Performance Management (MPM) Survey, just nine per cent of CEOs and six per cent of CFOs leverage marketing data for strategic planning. This was in 2013, but time and again we see companies who haven’t translated their sales results into easy to understand customer driver reporting. The only way you can do this is with a loyalty ID across a large % of your transactions. Then you can start to produce reports and insights from marketing data that helps your CEO and CFO understand why sales were up or down and work with the various departments to come up with future strategies to drive growth in customers, penetration of categories and get the right range of products in the right stores.

Loyalty is a top priority for retailers in the next 5 years

If you dig below the criticism of loyalty programmes not always guaranteeing growth, with high profile examples such as the recent share and profit declines for Tesco, you’ll find the real reasons for loyalty not driving results is often that the organisation has only used loyalty as a me too approach or not fully harnessed the data and insights that a programme brings to the whole organisation. Many retail organisations are now realising that loyalty is the lynch pin to driving many of their growth strategies for future. Customer experience enhancement, omni channel experience, data driven marketing, analytics and insights, they all rely on loyalty programmes and these areas are driving shifts in marketing and IT budgets to support loyalty initiatives.

A recently released report from Boston Retail Partners in the US found that Loyalty programmes are a top priority for 46% of retailers; 62% have increased their Loyalty budgets in the last year and 56% of retailers plan to participate in mobile loyalty applications in five years.

So how do your 5 year plans shape up, is starting a loyalty programme or reinvigorating your current one on your radar for 2016? Are you wanting to understand how to develop a data strategy for your business or explore how you could integrate loyalty into your mobile strategy? If you are then give me a call on 09 524 1124 or email me for a chat [email protected].

About Aimia New Zealand

Aimia New Zealand is based in Newmarket, Auckland and has 34 employees helping design and run loyalty programmes for a range of banks, retail and transport organisations.

About Aimia

Aimia Inc. (“Aimia”) is a global leader in loyalty management. Employing more than 4,000 people in over 20 countries worldwide, Aimia offers clients, partners, and members proven expertise in launching and managing coalition loyalty programs, delivering proprietary loyalty services, creating value through loyalty analytics, and driving innovation in the emerging digital, mobile, and social communications spaces.

Aimia owns and operates Aeroplan, Canada’s premier coalition loyalty program, Nectar, the United Kingdom’s largest coalition loyalty program and Nectar Italia, Italy’s first independent loyalty coalition program. In addition, Aimia owns stakes in Air Miles Middle East, Mexico’s leading coalition loyalty program, Club Premier, Brazil’s Prismah Fidelidade, and i2c, a joint venture with Sainsbury’s offering insight and data analytics services in the UK to retailers and suppliers. Aimia also holds a minority position in Cardlytics, a US-based private company operating in transaction-driven marketing for electronic banking. Aimia is listed on the Toronto Stock Exchange (TSX: AIM).

Visit us at www.aimia.com or join the conversation at www.aimiainstitute.com